The Market

The nation’s unemployment rate surprised Wall Street on Friday with a smaller than expected loss of jobs. The Labor Department reported 36,000 fewer jobs in February, compared to the 50,000 drop that analysts had expected, according to a Reuters poll. The unemployment rate remained steady at 9.7 percent, better than the 9.8 percent economists had predicted. Consumer borrowing rose by $4.96 billion, or 2.43 percent, in January after nearly a year of declines. The Federal Reserve, which reported the numbers, revised December’s consumer borrowing to a 2.23 percent drop. For the week, the Dow gained 2.33 percent to close at 10,566.20. The S&P climbed 3.12 percent to finish at 1,138.70, and the NASDAQ rose 3.94 percent to end the week at 2,326.35. 

Taking Control – Thirty-seven percent of American workers age 45-59 have increased their retirement savings percentage and anticipate working longer before retirement as a result of the 2007-09 bear market for stocks (Source: Center for Retirement Research, BTN Research).   Prediction – Five years ago last week (March 2, 2005), then Fed Chairman Alan Greenspan told the House Budget Committee that the U.S. government needed to undertake “major deficit-reducing actions.” Greenspan said, “I fear we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver” (Source: House of Representatives, BTN Research).   

Hard Worker – The average productivity of the American worker (defined as output per hour of work) has increased 30 percent over the last decade (i.e., 2000-2009). Mathematically, this means the quantity of work done in 1999 during a 40-hour work week could now be completed in less than 31 hours (Source: Department of Labor, BTN Research).    

WEEKLY FOCUS – Treat Your Career As A Valuable Resource The current recession has some retirees considering at least a part-time job to supplement their portfolio drawdown. Many near-retirees have decided to continue working a few more years to allow their portfolios to recover from the market declines. The labor market, however, has put a monkey wrench into those admirable plans. With many Americans underemployed, part-time work has become scarce, and even those still working full-time may find their employment jeopardized by workforce reductions. 

Hardest hit may be those in their 50s who have long years of tenure in their jobs. Companies looking to reduce labor costs often look to get employees with long service records off the books, in favor of new employees. Many of these workers have insufficient funds to retire early, even with a severance or early retirement package from their employer, as they haven’t hit several important retirement milestones: age 59 ½ to start taking qualified plan or IRA distributions without penalty, age 62 to start receiving Social Security benefits, and age 65 to qualify for Medicare. Keeping skills and credentials up to date has never been more important for this group. Make yourself more valuable to your current employer or more attractive to a prospective one by earning a new certification to help in your job, expanding your education into a complementary or related field or learning a computer application more expected of the “kids” at the company. 

Staying connected to colleagues and peers outside your company can also prove worth the time if you find yourself looking for work. If you don’t belong to a professional group, join one, and if you haven’t been active, get back in touch. Networking helps more unemployed professionals land new jobs than any job posting website. Treat your career as the valuable resource it is. The ability to work as long as you are able is one of your most important assets for preparing for retirement. If you need help creating a “plan B” for keeping your retirement plan on track if you become unemployed, call our office for an appointment. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific

Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 303558

The Market

The Dow and the S&P ended February with their best gains since November, climbing 2.6 percent and 2.9 percent respectively, while the NASDAQ had its best month since December, gaining 4.2 percent. All three indexes had small declines for the week, however, as existing home sales recorded an unexpected drop in January and consumer sentiment fell in February. Those signs of the economy’s ongoing struggle to recover were offset slightly by a revised gross domestic product report from the Commerce Department, which showed the economy grew at a 5.9 percent annualized rate in the fourth quarter, compared to the 5.7 percent pace previously reported. For the week, the Dow lost 0.69 percent to close at 10,325.26. The S&P fell 0.37 percent to finish at 1,104.49, and the NASDAQ declined 0.25 percent to end the week at 2,238.26.

Paper or Plastic? – Over the 25 years from Dec. 31, 1983, to Dec. 31, 2008, outstanding credit card balances in the

U.S. grew by 10.5 percent per year, reaching $957 billion. From the end of 2008 to the end of 2009, outstanding credit card balances fell by 9.5 percent to $866 billion. The government has tracked credit card data since 1968. Last year’s drop in the outstanding credit card balances nationwide was the first time ever that the year-over-year change was negative (Source: Federal Reserve, BTN Research). 

We Are Saving More – The national personal savings rate in the

U.S. was 4.6 percent as of Dec. 31, 2009, the highest year-end rate since Dec. 31, 1996. As recently as March 31, 2008, the national personal savings rate was 1.2 percent. As of Dec. 31, 1984 (i.e., 25 years ago), the rate was 10.4 percent (Source: Bureau of Economic Analysis, BTN Research).  

In the Business of Health – The five largest U.S. health insurance companies had combined profits in 2009 of $12.2 billion, up from $7.8 billion of profits in 2008 (Source: Health Care for America Now, BTN Research).  

 

WEEKLY FOCUS – Identity Theft: Deter, Detect, Defend 

The Federal Trade Commission (FTC) reported last week that for the first time since it started tracking identity theft a decade ago, the number of complaints it received dropped in 2009. Even with a 10 percent decline, however, the FTC still logged 278,078 reports of identity theft. Other types of fraud jumped by 24 percent in 2009, possibly due to the economy. Debt collection fraud topped the “other” list, accounting for nearly 10 percent of all complaints. Reports of credit card fraud more than tripled in 2009. 

These numbers reflect only consumers who self-reported the fraud to the FTC. Of all fraud complaints reported, nearly half (48 percent) of victims say their first contact with the perpetrator came through    the Internet, with another 12 percent making contact through a website and 10 percent through a phone call. 

The FTC recommends that consumers use an approach of deter, detect and defend. Deter identity theft by safeguarding your Social Security number and other personal

information, shredding financial documents, deleting unsolicited emails and avoiding easy-to-guess computer passwords. Detect identity theft by watching for unexpected account statements or bills that do not arrive as expected, denials of credit for no apparent reason, and calls or letters about purchases you did not make. Monitor your credit card report and your financial statements closely. 

Defend against identity theft as soon as you suspect it by placing a fraud alert on your credit reports, closing any accounts that may be at risk, filing a police report and reporting the incident to the FTC. 

Protecting your personal

information is important to us. We will never send confidential

information such as account numbers, balances or statements to you by email. Once your account has been opened, we should never need to ask for your Social Security number by phone. If you ever doubt that a person claiming to represent our firm actually does work for us, please don’t hesitate to end the call and then call our office directly to verify. We’re your partner in ensuring only you have access to the assets you’ve working so hard to attain. 

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 303418

 

The Market

The Federal Reserve announced late Thursday that it would increase its discount rate, charged to banks for emergency loans, by a quarter point to 0.75 percent. The Fed cited improved conditions in financial markets that have decreased the need for government help as the reason for the surprise increase. The Fed said it would leave interest rates affecting consumer loans unchanged. Core inflation – which excludes food and energy costs – fell in January for the first time since December 1982. Overall inflation increased just 0.2 percent. The Commerce Department will release its January durable goods report on Thursday and its revised fourth-quarter gross domestic product report on Friday. For the week, the Dow gained 3.12 percent to close at 10,402.35. The S&P rose 3.19 percent to finish at 1,109.17, and the NASDAQ increased 2.76 percent to end the week at 2,243.87.

Health Cost – Total U.S. health care spending was $2.5 trillion in calendar year 2009, equal to $6.85 billion of spending a day (Source: Centers for Medicare and Medicaid Services, BTN Research).    

More Paid By The Top Group – In 1980, the top 1 percent of taxpayers paid 19.1 percent of all federal income tax (FIT), and the bottom 50 percent of taxpayers paid 7.1 percent of FIT. In 2007, the top 1 percent of taxpayers paid 40.4 percent of all FIT, and the bottom 50 percent of taxpayers paid 2.9 percent of FIT. Thus since 1980, the top 1 percent of taxpayers has gone from paying nearly three times the FIT of the bottom 50 percent of taxpayers to nearly 14 times as much (Source: Tax Foundation, BTN Research).     

Middle Age – If you divide the U.S. population of 309 million into five-year increments (i.e., 0 to less than 5 years old, 5 to less than 10 years old, etc.), there are more Americans age 45-49 years old than any other five-year age group. The 23 million Americans just short of their 50^th birthday comprise a group that is slightly larger than the 22 million Americans age 50-54 (Source: Census Bureau, BTN Research).   

 

WEEKLY FOCUS – Watch Your Credit Card’s Fine Print 

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act’s final provisions take effect today. The law, enacted last May, sought to limit or eliminate many of the worst offenses by credit card issuers, such as retroactively raising interest rates on existing balances and double-billing cycles. Because issuers had almost nine months to digest the new rules, they’ve had plenty of time to look for creative ways to replace the lost revenue streams. To protect yourself, pay close attention to any mailings or statement enclosures from your credit card issuer that might contain the following pitfalls. 

1. Annual fees – According to Lowcards.com, about 20 percent of credit cards have an annual fee, but that will likely increase. Many issuers have already added annual fees to formerly free cards, and you may not even be aware that you’re paying them.

 

2. New fees – The CARD Act eliminated some fees, such as those charged to a card holder for being over the card’s limit. Look for issuers to recoup the lost revenue by increasing other fees – like balance transfers, cash advances and late fees – and to introduce new fees, like account inactivity or paper statement fees. (CARD eliminated an issuer’s ability to charge extra for payments made via phone or web.)

 

3. Variable rates – The CARD Act limits the amount and reasons that issuers can increase fixed interest rates, but it doesn’t limit increases in rates tied to a variable like the prime rate. Watch for your fixed rate card to switch to a variable rate. In addition, CARD limits only interest rates on existing card holders; new credit cards are not subject to rate limits.

 

4. Devaluing rewards – Just like subprime home loans, free money is a thing of the past. Discover has already lowered its cash-back program from 1.5 percent of purchases to 1.25 percent. American Express has limited reward points accruals on late-paying accounts, unless the card holder pays a $29 fee.

 

Credit cards can be an important source for emergency funds, but they should never be a resource for daily living expenses. Like any financial instrument, you need to be an

informed and aware consumer. Take the time to read any notices or communications from your card issuer. If you have questions about how credit card balances can impact your lifestyle, please call us. We’re always happy to help.   

 

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 303317

 

The Market

Wall Street ended a four-week losing streak with modest gains last week. Signals from China that it would move to control inflation in its burgeoning economy along with concerns about debt problems in several European countries have kept investors guessing. The Labor Department reported Thursday that U.S. non-farm productivity rose at a 6.2 annual rate during the fourth quarter and ended 2009 with an increase of 2.9 percent over 2008, the largest increase since 2003. For the week, the Dow gained 1.02 percent to close at 10,099.14. The S&P rose 0.97 percent to finish at 1,078.51, and the NASDAQ increased 1.98 percent to end the week at 2,183.53.

Retail Rise – Retail sales rose more than expected in January, according to a report issued by the Commerce Department on Friday. Retail sales increase by 0.5 percent, beating economists’ predictions of 0.3 percent. The increase was the largest since November. 

Needing Help – A 60-year old American has a 40 percent chance of requiring nursing home care at some point during his/her remaining lifetime (Source: MetLife Mature Market Institute, BTN Research).    

The Best and the Worst – In the past half-century (i.e., the 50 years from 1960-2009), the largest percentage gain day for the S&P 500 (up 11.6 percent on Oct. 13, 2008) and the second largest percentage loss day (a drop of 9.0 percent on Oct. 15, 2008) occurred within two days of each other. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market (Source: BTN Research).     

Thanks a Lot – Of those Americans that work at least 50 hours a week, 56 percent believe technology has increased the stress of their job as opposed to alleviating tension (Source: Money Magazine, BTN Research).   
 

WEEKLY FOCUS – Are Mom and Dad in Debt? 

If you thought your college-bound child’s credit card to be your biggest debt concern, you may want to look at mom and dad’s expenses, too. According to the Employee Benefits Research Institute, the average debt load for households of people age 75 and older grew 160 percent to an average of $20,234 between 1992 and 2004. Research by professors from Ohio University, Harvard Law School and the University of Texas at Austin indicate that people age 65 and older represent the fastest-growing group filing for personal bankruptcy. 

While a few of those debt-burdened seniors may have overextended their credit in pursuit of retirement dreams, most turned to debt in crisis, usually when a medical problem hits for which they have no cash and no insurance coverage – even from Medicaid, a much more limited resource than most Americans think. Living on a fixed income, most seniors have few avenues to increase cash flow to cover unforeseen expenses. Some make attempts to pay off utilities, medical and other bills individually, others resort to a credit card, quick loan or line of credit. 

Just as a child or spouse who runs up a credit card or line of credit may be embarrassed about coming clean, elderly parents may also shy away from sharing that information. However, as part of helping ensure estate documents and arrangements are in order, your parents need to be honest with you and their advisors about their debt. The alternative may be family heirlooms being sold to pay outstanding bills. 

Encourage your parents to share their full financial picture with you and recommend they meet with a financial professional to ensure proper risk management and estate planning. We’re always available to help you with those conversations and the financial analysis that goes with them. Call our office for help or to schedule an appointment. 
 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 303236

The Market

Concerns about U.S. unemployment and European government debt created another volatile week on Wall Street. The Department of Labor reported that U.S. employers unexpectedly cut 20,000 jobs in January, but the overall unemployment rate fell to 9.7 percent, a five-month low. Across the Atlantic, several European countries – most notably Portugal, Spain and Greece – continue to struggle with massive deficits, with Portugal’s government rejecting a plan to curb spending. Americans seem to be doing well on their individual austerity efforts, borrowing less for a record-setting 11^th straight month in December. For the week, the Dow lost 0.49 percent to close at 10,012.23. The S&P fell 0.68 percent to finish at 1,066.19, and the NASDAQ dropped 0.29 percent to end the week at 2,141.12.

Some Disagreement – Ben Bernanke was approved for a second four-year term as Fed Chairman by a 70-30 vote in the Senate on Jan. 28, 2010. The 30 votes against Bernanke’s confirmation were the greatest number of votes opposing a Fed Chairman nominee since 16 senators voted against Paul Volcker’s nomination in 1983. Bernanke’s new term will run through Jan. 31, 2014 (Source: Federal Reserve, BTN Research).   

Rates Going Up? – There are now just two months remaining (i.e., February and March) in the Fed’s program to purchase $1.25 trillion of mortgage-backed securities. The program, which originally began with Fed purchases in March 2009, will stop by the end of next month. Eric Rosengren, the president of the Federal Reserve Bank of Boston, predicted last month that mortgage interest rates will rise by as much as 0.75 percent when the purchase program ends (Source: Federal Reserve, BTN Research).   

Looking Back – Fifty-five percent of retired Americans surveyed (including those that had previously used a planner and those that have never used a planner) wished that they had used or consulted with a financial planner earlier in their life as they planned out the finances of their retirement years (Source: Merrill Lynch, BTN Research).  

    

WEEKLY FOCUS – Passwords: When to Secure and When to Share 

Internet users continue to struggle with the proliferation of sites requiring passwords. While the added security is admirable, keeping passwords straight in your head has become a mind-boggling proposition. Computer security and privacy gurus admonish users to never write down user names and passwords and to never use the same password repeatedly for different accounts. But a recent survey by Trusteer, a technology security firm, found that 73 percent of web users use their online banking password as their password on other websites, and about half use the same password and user name. 

On the flip side, taking your passwords to your grave creates problems for your heirs, who may need to access information from your online accounts. So how do you protect your passwords but make them available to those who need them in an emergency? 

One option is account aggregation websites, which use sophisticated software called “screen scraping” to gather data from those PIN-protected accounts that have been authorized by the individual. Virtually any accounts that report balances on a website can be brought into your account aggregation profile: checking and savings accounts, investment accounts, mutual funds, 401(k) accounts, frequent flier and reward plans, travel reservation services, credit card accounts and loans. Some sites even offer digital document storage, providing a paperless depository for wills, insurance policies, powers of attorney, contracts and other important documents.  

Even with account aggregation, you will still have at least one user name and password to make accessible for your loved ones. You may also need to remind yourself in the event of a hurricane, fire or other natural disaster. As part of your personal disaster recovery plan, put lists of your account numbers, user names and passwords in sealed envelopes. Give one to your attorney or other trusted advisor, place one in your home safe (fire- and water-proof), place one in your safe deposit box and send one to a trusted relative who lives in another state. 

Identity theft has become a growing risk. Be sure that in protecting yourself, you don’t inadvertently make things more difficult for yourself and your heirs in an emergency. If you’d like to learn more about account aggregation, give our office a call. 
 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 303132 

The Market

The markets struggled last week amid concerns about the financial stability of Greece, Portugal and Spain combined with declines in technology stocks. On Friday, the Commerce Department released its report showing that the economy grew at a 5.7 percent annualized rate in the fourth quarter, the second straight quarterly increase and the fastest growth since 2003. Business spending on equipment and software fueled the increase, which analysts said will flatten as companies rebuild inventories and stimulus efforts run their course. The Commerce Department has also reported that consumer spending rose 0.2 percent in December, the third straight monthly increase in spending. On Thursday, the Senate approved a second term as Federal Reserve chairman for Ben Bernanke. For the week, the Dow lost 1.04 percent to close at 10,067.33. The S&P fell 1.62 percent to finish at 1,073.87, and the NASDAQ dropped 2.63 percent to end the week at 2,147.35.

After The Bear Ends – There have been 10 bear markets (i.e., peak to trough drop of at least 20 percent) for the S&P 500 since 1957, the 10^th bear market having bottomed just last March 2009. When reviewing the first and second year performances of the S&P 500 following the bear market lows since 1957, the best first-year performance for the stock index (up 58 percent) from a bear market low was followed by the worst second-year performance for the index (up 2 percent). Not surprisingly, the worst first-year performance for the stock index (up 23 percent) from a bear market low since 1957 was followed by the best second-year performance (up 25 percent) for the index. The results were calculated based upon the change of the raw index value and do not include the impact of reinvested dividends (Source: BTN Research).      

Much Bigger – The market capitalization of the S&P 500 on Dec. 31, 2009, was $9.9 trillion, exactly three times as large as the $3.3 trillion market cap of the Dow Jones Industrial Average. The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy (Source: S&P, Dow Jones, BTN Research).   

More At The Top – The four largest banks in the U.S. have 56 percent of all domestic bank assets.  Ten years ago, the concentration of assets in the four largest banks was 35 percent (Source: Wall Street Journal, BTN Research).    
 
 
 

WEEKLY FOCUS – Financial Planning for Nontraditional Families 

Television in the 1950s and ‘60s gave us plenty of images of the “traditional” family – a married man and woman with biological children. Even back then, real life wasn’t quite that clean cut, but U.S. laws typically assumed that model of a nuclear family. 

Whether more prevalent or simply more public, nontraditional families have come further into the mainstream and may often find that the rules – from tax treatment to employee benefits to estate issues – do not exactly fit their needs. Even traditional families may find that subsequent generations create situations – through marriage, divorce, co-habitation or having children – that call for special estate planning considerations. 

While a family may have a nontraditional structure, its financial needs will most likely be similar to those of traditional families – saving for college, planning for retirement, managing risk and transferring assets at death. The path to attaining those goals, however, may require creative thinking and a deeper level of knowledge about available tools. 

For example, for a married couple, a spouse typically has health care and financial powers if the other spouse becomes ill. That’s not the case for a non-married couple, which can create problems when hospitals or banks must follow privacy regulations and withhold information from the partner. An advanced health care directive and a financial power of attorney must be in place to ensure the competent spouse can continue to make decisions. 

Our office can work with other professionals in accounting, legal and insurance to create financial plans and other important documents that fulfill the needs of nontraditional families. Call our office to schedule an appointment for you or your loved one. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 302960

The Market

Political uncertainty and some disappointing earnings reports led the markets to a three-day decline last week. President Obama’s proposal to prohibit banks from owning, sponsoring or investing in hedge funds for proprietary profit raised concerns for some major banks. In addition, Ben Bernanke’s confirmation to a second term as Fed chairman seems uncertain, and the Democrats lost their hold on the Senate super-majority after the election of a Republican to fill Ted Kennedy’s seat in Massachusetts. Disappointing earnings from Google and warnings from several other companies also brought the markets lower, according to Reuters. For the week, the Dow lost 4.09 percent to close at 10,172.98. The S&P fell 3.88 percent to finish at 1,091.76, and the NASDAQ dropped 3.61 percent to end the week at 2,205.29.

 

Strong Lead, Weak Jobs – The Conference Board reported last week that eight of the 10 components of the leading economic indicators index showed improvement last month, causing the index to rise 1.1 percent compared to the 0.7 percent increase that economists expected, according to a Thomson Reuters poll. Job creation, however, has lagged, with the Labor Department reporting that new jobless claims rose slightly for the week ending Jan. 16. Economists had expected a small decline, according to Thomson Reuters. Companies have been cutting fewer jobs but have not yet ramped up hiring, the news source said. Down & Up – The NASDAQ Composite was up 45.3 percent (total return) in 2009 after losing 40.0 percent in 2008. The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system (Source: BTN Research).    

When the Fed Acts – The last time the Fed started tightening interest rates (i.e., a first rate hike) was June 30, 2004. In the six months prior to that June 2004 Fed rate hike, the S&P 500 gained 3.4 percent (total return). In the six months after that June 2004 Fed rate hike, the S&P 500 gained 7.2 percent (Source: BTN Research).      Lonesome Highway – American auto sales (i.e., cars and trucks) in calendar year 2009 totaled 10.4 million, down from 13.2 million in 2008. The 2.8 million fewer sales (i.e., 2009 vs. 2008) is equal to 234,000 fewer autos sold per month in 2009 when compared to 2008 (Source: Autodata).  

 

WEEKLY FOCUS – Helping

Haiti While Avoiding Scams

 Disasters – whether man-made or natural, at home or across the globe – seem to bring out the best in Americans, who quickly mobilize to send money, supplies and manpower to distressed areas. Unfortunately, the eagerness to help and the urgency of the response create a perfect storm for the unscrupulous to launch their schemes. The FBI and computer-security companies have issued warnings about emails and websites asking for donations to

Haiti relief efforts. According to Proofpoint, a computer-security firm, suspicious links to websites rose by 400 percent in the days following the initial earthquake on the island. These emails can look legitimate – some report to come from the British Red Cross and include the London address of the Red Cross where responders can wire funds via

Western Union. The email contact is wrong, however, and the British Red Cross does not accept donations via

Western Union.

 In addition, online searches for terms like “Haiti relief fund” or “

Haiti donations” can yield results for scammer websites intended to collect

information like your credit card number or deliver malware that can compromise your computer. The FBI recommends that consumers make contributions directly to known organizations. You can find lists of legitimate websites for donations at www.whitehouse.gov, the United Nations at www.un.org/en/ and the Red Cross at www.redcross.org.

 Making charitable donations has become easier in an electronic age. Unfortunately, so has fraud. Protect yourself by ensuring your donations are being made through a legitimate relief organization. If you choose to make donations online, be proactive and use one of the sources above. Do not respond to email or telemarketing solicitations, even if they appear to be from reputable organizations. If you have any questions about sending money to

Haiti relief efforts, or any charitable organization, please feel free to call our office.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific

Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 302834

The Market

The Dow and S&P rose to their highest levels in over a year on Thursday, ending the day at 10,710.55 and 1,148.46, respectively. Investors received mixed news as companies began issuing quarterly earnings reports, with JPMorgan Chase announcing heavy mortgage and credit card loan losses. Disappointing reports on retail sales and consumer sentiment also contributed to market declines for the week. For the week, the Dow lost 0.05 percent to close at 10,609.65. The S&P fell 0.77 percent to finish at 1,136.03, and the NASDAQ dropped 1.26 percent to end the week at 2,287.99.

Fat Fed – The Federal Reserve generated a $45 billion profit for 2009, money that goes back into the U.S. Treasury. According to a Jan. 11 report in the Washington Post, the Fed had the highest earnings in its 96-year history. The largest previous profit was $34.6 billion in 2007. The Fed’s earnings for 2009 exceed those of most financial institutions, “easily topping the expected profits of Bank of America, Goldman Sachs and JPMorgan Chase combined,” the Post said. Most of the Fed’s earnings came from buying bonds to hold down interest rates and stimulate the economy. The Fed owned $1.8 trillion in U.S. government debt and mortgage-related securities at the end of 2009, compared to $497 billion a year ago. (Source: Washington Post).

No Bank Bonus – Despite the Federal Reserve earning a record $45 billion profit in 2009, Chairman Ben S. Bernanke will receive no bonus. He did receive a small cost-of-living increase, bringing his salary to $199,700. (Source: Washington Post). 

Flat Inflation – The consumer inflation rate rose just 2.7 percent in 2009, according to a Labor Department report issued Jan. 15. The decline in food costs offset increases in energy prices. The Consumer Price Index rose just 0.1 percent in December. The Labor Department reported separately that inflation-adjusted weekly wages for the year declined 1.6 percent, the largest drop since 1990.  WEEKLY FOCUS – Donor-Advised Fund Channels Dylan In an apparent first for the music business, the international royalties from Bob Dylan’s “Christmas in the Heart” album will be channeled into a donor-advised fund benefiting Crisis of London, a British charity that provides meals to the homeless, according to CAFAmerica, the company that established the fund.  A donor-advised fund, according to the IRS, is an account maintained and operated by a 501(c)(3) nonprofit organization, referred to as the sponsoring organization. Each account is funded by contributions from individual donors. The sponsoring organization has legal control over the accounts, but the donor is allowed to advise on the investment of the assets, which can include cash, securities and even art, and the distribution of funds.  

According to an April 22, 2009 article in the Wall Street Journal, donor-advised funds can cost significantly less to maintain than private foundations and are not required to make distributions as often as a foundation. The National Philanthropic Trust reported that the number of donor-advised funds rose 11 percent in 2008, after a 13 percent increase in 2007. In addition to a lower maintenance cost, a donor-advised fund may offer additional advantages over a private foundation, including a higher limit for deducting contributions, a lack of taxes on investment gains, and no requirement to make annual distributions. Also, the tax forms for donor-advised funds are not made public, as foundation returns are, allowing donors to retain their privacy. 

Donor-advised funds may have disadvantages as well, including relinquishing control of contributions. The sponsoring organization is not required to act in accordance with the donor’s wishes, although such a situation is rare, according to the Wall Street Journal. Also, the donations are irrevocable and must be used for a qualified charitable organization. Before selecting any vehicle for fulfilling your philanthropic plans, you should consult with your tax professional and estate planning attorney. Because your charitable gift planning may impact your retirement investment and income distribution plans, we are happy to work with your other professionals to ensure a cohesive plan. Call our office to schedule a joint appointment. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 302678

The Market

After two years of negative returns, U.S. equity markets ended 2009 with their highest gains since 2003. The S&P gained 26.46 percent for the year compared to a loss of 38.5 percent last year, rebounding 65 percent after hitting a 12-year low on March 9. For the fourth quarter, the Dow gained 7.5 percent, the S&P gained 5.5 percent and the NASDAQ gained 6.9 percent. For the four-day holiday week, the Dow lost 0.85 percent to close at 10,428.05. The S&P fell 0.97 percent to finish at 1,115.10, and the NASDAQ declined 0.72 percent to end the week at 2,269.15. 

Retail Sales A-Leaping – Initial reports on holiday retail sales show a 3.6 percent increase from Nov. 1 to Dec. 24, a much brighter story than the 3.2 percent drop in the same period in 2008, according to MasterCard Advisors’ Spending Pulse. Adjusting for the extra shopping day between Thanksgiving and Christmas 2009, sales gains were closer to 1 percent. Online shopping, however, leapt 15.5 percent for the season, compared to a year ago, although it accounts for only 10 percent of total retail sales. (Source: USA Today) 

$100 Butter – If grocery prices had risen at a comparable rate to health care since the 1930s, consumers would currently be paying $107.90 for a dozen oranges, $24.20 for a roll of toilet paper, $64.17 for a pound of coffee and $102.07 for a pound of butter. (Source: American Institute for Preventive Health, Blue Cross and Blue Shield Association) 

Green Taxes – States are increasingly looking to save money by cutting back on distributing paper income tax forms and encouraging electronic filing. Mississippi has become the second state (after New York) to completely discontinue mailing tax forms at an estimated savings of $90,000 annually. California has stopped mailing forms to non-residents and part-year residents, saving more than $259,000.

Kansas has cut distribution of forms at libraries and grocery stores and some instruction forms will be available only online, saving $710,000. According to the IRS, of the 141 million returns filed in 2009, more than 67 percent were filed electronically, compared to 59 percent in 2008. (Source:

USA Today)

 
WEEKLY FOCUS – Beware 2010 Retroactive Tax Resurrection A Forbes website article posted the final day of 2009 caught our eye this week: When the U.S. Senate recessed for the holidays, its members left 50 tax breaks to expire at the end of the year. The House on Dec. 9 had passed a bill extending most of the breaks (but notably not the alternative minimum tax or AMT), but the Senate never addressed its similar measure. On Dec. 29, with less than three days remaining in the year, Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa) pledged in a joint letter to extend the provisions retroactively as soon as possible.We’ve become used to the annual extension of the AMT patch, but Congressional procrastination this year led to a number of other taxes winding up in limbo, most notably the estate tax, which effective Jan. 1 has been repealed for 2010. Don’t celebrate yet – Democrats have promised to resurrect it retroactively.Other tax breaks that expired New Year’s Eve:

• the deduction for state and local sales tax for those who itemize
• the extra $1,000 deduction for real estate taxes for filers who claim the standard deduction
• the $4,000 deduction for college tuition
• the Research & Development credit for companies – which has been extended 13 times since 1981 without Congress making it permanent

Congress has made such a habit of leaving taxpayers guessing by letting tax breaks lapse and then issuing temporary patches that such tax law provisions have become known as “extenders,” according to Forbes. Rather than making a decision to eliminate them or make them permanent (and thereby recognize their actual costs), Congress continually extends them until the patch itself becomes the rule, rather than the exception.Your tax situation can impact your overall investment plans, and vice versa. With so many pieces of the tax puzzle in limbo, it’s more important than ever that you consider the assistance of a professional tax advisor and estate planning attorney to help you stay abreast of tax law changes that may impact you. We are happy to work closely with your accountant and attorney to assist you in developing plans for your personal situation. Call us to schedule a joint appointment. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific

Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 302365

The Market  - The equity markets hit new highs for the year on Thursday after positive news from the Labor and Commerce departments. Despite a disappointing new home sales report for November released on Wednesday, the markets rallied around a drop of 28,000 in new unemployment claims for the week ending Dec. 19, and a 2 percent jump in durable goods orders, excluding transportation. The markets will be open regular hours on New Year’s Eve (Dec. 31), but will be closed all day on New Year’s Day (Jan. 1, 2010). For the week, the Dow gained 2.06 percent to close at 10,520.10. The S&P rose 2.80 percent to finish at 1,126.48, and the NASDAQ climbed 3.35 percent to end the week at 2,285.69.

Subprime Switch – In February, the Credit Card Act will take effect, limiting the annual fee that card providers can charge to 25 percent of the credit line. First Premier Bank, a subprime credit card issuer affiliated with Premier Bankcard of Sioux Falls, S.D., is testing a way to make up for the loss of its $256 in first year fees for a $250 credit line. The company has raised the interest rates on the card from 9.9 percent APR to 79.9 percent – that’s right, just under 80 percent interest. The company, which targets people with credit scores below 700 who can’t get approved for lower-rate cards, said it is simply pricing its product based on the risk associated with its market. The rate hike comes just less than two months before the Credit Card Act would also limit the bank’s ability to raise interest rates. (Source: USA Today) Boomer Rebound? – The number of unemployed baby boomers rose in November to 7 percent compared to 6.6 percent in October. Unemployment may become a permanent condition for many workers in that age group, with an estimated 378,000 baby boomers potentially forced to retire instead of resuming working, according to economists with Wellesley College. The number of Social Security applications for the fiscal year ending Sept. 30 was 21 percent higher than the prior fiscal year.
 Make More, Spend More – The Commerce Department reported last week that personal incomes rose by their fastest pace in six months during November, and spending marked its second consecutive increase. Personal income rose 0.4 percent in November, boosting spending by 0.5 percent. Both increases were slightly less than analysts had predicted, according to the Associated Press. Taking into account inflation, after-tax incomes are increasing at a 1.2 percent annualized rate. WEEKLY FOCUS – Five Tips For Keeping Your Financial Resolutions Financial resolutions can be especially difficult to stick with because, like eating and exercising, our spending, saving and investing habits tend to be tied to our emotions more than our logic. Here are Five Tips For Keeping Your Financial Resolutions: 

1.   Form new habits by tying them to current behavior. If you have a regular system for paying bills, make a “bill” from your retirement plan and pay it (by making a contribution to your IRA) while you pay the other bills.  2.   Put them on autopilot. One of the easiest ways to keep saving and investing goals is to set up automatic deposits or investments. Payroll deduction for 401(k) contributions is a great example – you never have possession of the cash, so you don’t feel the pain of taking it out of your spending money. Contact your human resources department now about starting or increasing your contributions.  3.   Make your resolutions achievable and realistic. Many people make resolutions without much planning or forethought – and fail the same way. If you are serious about your financial resolutions, do some homework, crunch some numbers and put your plan in writing.  4.   Break them down into small steps. Trying to keep too many resolutions at once will leave you feeling overwhelmed. Instead of making resolutions for the whole year now, break them down and add one or two each quarter.  5.   Work with an accountability partner or coach. Anyone who has tried to implement a weight loss or exercise plan knows that a buddy system increases the odds of success. If you need help sticking to your financial resolutions, we can work with you to create a plan for keeping your resolutions, whether they include college planning for your child or funding your retirement.Call our office for an appointment to discuss your financial resolutions and how we can work together to make 2010 a happy and prosperous new year!  * The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific

Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 302262